Third quarter net loss attributable to
Quorum Health Corporation was ($75.9) million, or ($2.52) per
share
Third quarter Adjusted EBITDA was $13.7
million and Same-facility Adjusted EBITDA was $30.6 million
Full year 2019 Same-facility net operating
revenue guidance revised to $1.525 billion to $1.575 billion and
Same-facility Adjusted EBITDA guidance revised to $140 million to
$155 million
Quorum Health Corporation (NYSE: QHC) (the “Company”) today
announced financial and operating results for the third quarter
ended September 30, 2019.
QUORUM HEALTH
CORPORATION
Unaudited Financial
Highlights
(In Millions)
Three Months Ended September
30,
2019
2018
Net operating revenues
$419.9
$460.5
Net loss attributable to Quorum Health
Corporation
($75.9)
($53.9)
Same-facility net operating revenues
$378.6
$389.3
Cash flows from operating activities
$25.2
$28.3
Adjusted EBITDA(1)
$13.7
$34.1
Same-facility Adjusted EBITDA(1 &
2)
$30.6
$42.0
(1)
A table providing supplemental information on Adjusted EBITDA,
Same-facility Adjusted EBITDA and reconciling net loss to Adjusted
EBITDA and Same-facility Adjusted EBITDA is included in this
release, see footnote (a).
(2)
Same-facility Adjusted EBITDA was previously reported by the
Company as Adjusted EBITDA, Adjusted for Divestitures. There has
been no change in how the financial measure is being
calculated.
“In the third quarter, we saw tangible evidence that our
strategic initiatives are taking hold, with growth in both adjusted
admissions and patient acuity. At the same time, we have
experienced what we believe is a short-term deterioration in our
revenue cycle performance, which accelerated as we approached the
transition of our revenue cycle services to R1 RCM on October 1 of
this year. Primarily due to this deterioration in our revenue cycle
performance, we’ve adjusted our 2019 outlook downward. The
transition of our back-office functions to R1 RCM began on October
1, 2019, and we have already begun to see improvement in many
aspects of our revenue cycle activities. Going forward, we remain
confident that R1 RCM will have a transformative impact on our
business and the communities we serve,” said Bob Fish, Quorum
Health’s President and Chief Executive Officer.
Financial results for the third quarter ended September 30, 2019
reflect the following:
- Compared to the third quarter of 2018, same-facility net
patient revenues decreased 2.5% or $9.2 million, while
same-facility net patient revenues per adjusted admission decreased
2.7%. The decrease in same-facility net patient revenues and net
patient revenues per adjusted admission were primarily attributable
to the following:
- An estimated $8 million impact from a decline in collectability
on self-pay accounts receivable attributable to the aforementioned
deterioration of revenue cycle activities ahead of the transition
of these functions to R1 RCM;
- A $4.2 million impact from a change in the timing of the
Company’s recognition of revenues associated with the sale of
property tax credits in Illinois compared to the third quarter of
2018; and
- A $2.0 million impact as a result of the Company being unable
to recognize revenues associated with the California Hospital
Quality Assurance Fee (“HQAF”) program in the third quarter of
2019, which were recognized in the third quarter of 2018. The
Company was unable to recognize these revenues as a result of
having insufficient information regarding the HQAF VI program which
began July 1, 2019. The Company expects that it will be able to
recognize revenues from the HQAF program again in the fourth
quarter of 2019.
- Same-facility adjusted admissions increased 0.2% compared to
the same period in 2018 and was primarily driven by a 2.5% increase
in outpatient surgeries, which was partially offset by a 5.9%
decrease in same-facility admissions and a 11.7% decrease in
same-facility inpatient surgeries. The offsetting volume decreases
were primarily attributable to the Company’s decision to
discontinue certain underperforming service lines in the second
quarter of 2019.
- Cash flows from operating activities during the third quarter
of 2019 were $25.2 million and included $6.6 million of cash costs
associated with the closure of MetroSouth Medical Center in Blue
Island, Illinois.
- As of September 30, 2019, the Company had $1.2 billion of
long-term debt and $44.4 million of cash. The Company had $777.7
million outstanding on its Term Loan Facility and $25.0 million
outstanding on its ABL Credit Facility. The Company’s Net Secured
Leverage Ratio as defined under the current Senior Credit Facility
was 4.49 to 1.00, implying additional borrowing capacity of $89.6
million as of September 30, 2019.
Divestiture Update
- On September 30, 2019, the Company completed the divestiture of
106-bed Watsonville Community Hospital in Watsonville, California
to Halsen Healthcare. Cash proceeds from the transaction were
approximately $39.9 million. Subsequent to the end of the third
quarter, the Company used the proceeds from this transaction to
repay outstanding principal on its Term Loan Facility.
- As previously noted, the Company discontinued all hospital
operations at 314-bed MetroSouth Medical Center in Blue Island,
Illinois on September 30, 2019. The Company recognized $6.6 million
of cash closure costs in the third quarter and expects to recognize
an additional $3.0 million to $5.0 million of cash costs associated
with the closure of this facility in the fourth quarter of
2019.
Financial Outlook
(In Millions)
2018 Actual
2019 Guidance Range
Same-facility net operating revenues
$1,556.6
$1,525 - $1,575
Same-facility Adjusted EBITDA
$149.4
$140 - $155
Commenting on the Company’s financial outlook, Alfred Lumsdaine,
Quorum Health’s Executive Vice President and Chief Financial
Officer said, “We are lowering our financial outlook for the year
in-light of our third quarter results, particularly the
deterioration in the performance of our revenue cycle activities
and a slower than expected realization of certain cost reduction
initiatives. Given our results year-to-date and our expectations
for the full year of 2019, we expect to enter into discussions with
our secured lenders with the goal of modifying our covenants to
ensure that we have the time and flexibility required to navigate
this time of transition in our business. Long term, we continue to
see tremendous opportunity for growth and improved profitability as
our revenue cycle normalizes and improves through our relationship
with R1 RCM.”
These projections are based on the Company’s historical
operating performance, current economic, demographic and regulatory
trends and other assumptions that the Company believes are
reasonable at this time. See “Forward-Looking Statements” below for
a list of factors that could affect the future financial and
operating results of the Company or the healthcare industry
generally.
A reconciliation of the Company’s projected 2019 Same-facility
Adjusted EBITDA, a forward-looking non-GAAP financial measure, to
net income (loss), the most directly comparable U.S. GAAP financial
measure, is omitted from this press release because the Company is
unable to provide such reconciliation without unreasonable effort.
This inability results from the inherent difficulty in forecasting
generally and in quantifying certain projected amounts that are
necessary for such reconciliation. In particular, sufficient
information is not available to calculate certain items required
for such reconciliation without unreasonable effort, including
interest expense, provision for (benefit from) income taxes and
other adjustments that would be necessary to prepare a
forward-looking statement of net income (loss) in accordance with
U.S. GAAP. For the same reasons, the Company is unable to address
the probable significance of the unavailable information.
Quorum Health Corporation will hold a conference call on Friday,
November 8, 2019, at 11:00 a.m. Eastern time, to review its
financial and operating results for the third quarter ended
September 30, 2019. To participate, please dial 1-844-761-3024
approximately 10 minutes prior to the scheduled start of the call.
If calling from outside of the United States, please dial
1-661-378-9914. Please reference Conference ID number 1237809 when
prompted by the conference call operator. The conference call will
also be webcast live from the Investor Relations portion of the
Company’s website. A presentation will be made available during the
call and will be found in the Investor Relations portion of the
Company’s website at www.quorumhealth.com. For those who cannot listen
to the live broadcast, a replay will be available shortly after the
call and will continue to be available for approximately 30 days.
Copies of this press release and the Company’s Current Report on
Form 8-K (including this press release) will be available on the
Company’s website at www.quorumhealth.com.
About Quorum Health Corporation
The principal business of Quorum Health Corporation is to
provide hospital and outpatient healthcare services in its markets
across the United States. As of September 30, 2019, the Company
owned or leased 24 hospitals in rural and mid-sized markets located
across 14 states and licensed for 2,038 beds. Through Quorum Health
Resources LLC, a wholly-owned subsidiary, the Company provides
hospital management advisory and healthcare consulting services to
non-affiliated hospitals across the country. Over 95% of the
Company’s net operating revenues are attributable to its hospital
operations business.
The Company’s headquarters are located in Brentwood, Tennessee,
a suburb south of Nashville. Shares in Quorum Health Corporation
are traded on the NYSE under the symbol “QHC.” More information
about the Company can be found on its website at www.quorumhealth.com.
QUORUM HEALTH
CORPORATION
UNAUDITED CONDENSED
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(In Thousands, Except Earnings
per Share and Shares)
Three Months Ended September
30,
2019
2018
% of
% of
$ Amount
Revenues
$ Amount
Revenues
Net operating revenues
$
419,900
100.0
%
$
460,507
100.0
%
Operating costs and expenses:
Salaries and benefits
215,457
51.3
%
226,237
49.1
%
Supplies
47,818
11.4
%
48,949
10.6
%
Other operating expenses
139,671
33.3
%
143,716
31.4
%
Depreciation and amortization
15,028
3.6
%
16,612
3.6
%
Lease costs and rent
11,121
2.6
%
11,661
2.5
%
Electronic health records incentives
(17
)
—
%
(31
)
—
%
Legal, professional and settlement
costs
5,191
1.2
%
1,519
0.3
%
Impairment of long-lived assets and
goodwill
8,010
1.9
%
32,438
7.0
%
Loss (gain) on sale of hospitals, net
1,206
0.3
%
805
0.2
%
Loss on closure of hospitals, net
18,414
4.4
%
1,111
0.2
%
Total operating costs and expenses
461,899
110.0
%
483,017
104.9
%
Income (loss) from operations
(41,999
)
(10.0
)%
(22,510
)
(4.9
)%
Interest expense, net
33,056
7.9
%
32,450
7.0
%
Income (loss) before income taxes
(75,055
)
(17.9
)%
(54,960
)
(11.9
)%
Provision for (benefit from) income
taxes
137
—
%
(1,074
)
(0.2
)%
Net income (loss) (a)
(75,192
)
(17.9
)%
(53,886
)
(11.7
)%
Less: Net income (loss) attributable to
noncontrolling interests
736
0.2
%
54
—
%
Net income (loss) attributable to Quorum
Health Corporation
$
(75,928
)
(18.1
)%
$
(53,940
)
(11.7
)%
Earnings (loss) per share attributable to
Quorum Health Corporation stockholders:
Basic and diluted (b)
$
(2.52
)
$
(1.85
)
Weighted-average shares outstanding:
Basic and diluted
30,178,229
29,215,823
QUORUM HEALTH
CORPORATION
UNAUDITED CONDENSED
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(In Thousands, Except Earnings
per Share and Shares)
Nine Months Ended September
30,
2019
2018
% of
% of
$ Amount
Revenues
$ Amount
Revenues
Net operating revenues
$
1,304,875
100.0
%
$
1,419,959
100.0
%
Operating costs and expenses:
Salaries and benefits
653,943
50.1
%
705,868
49.7
%
Supplies
149,405
11.4
%
160,732
11.3
%
Other operating expenses
383,414
29.5
%
440,910
31.0
%
Depreciation and amortization
44,167
3.4
%
52,015
3.7
%
Lease costs and rent
34,279
2.6
%
35,551
2.5
%
Electronic health records incentives
earned
592
—
%
(617
)
—
%
Legal, professional and settlement
costs
6,480
0.5
%
10,349
0.7
%
Impairment of long-lived assets and
goodwill
42,820
3.3
%
72,198
5.1
%
Loss (gain) on sale of hospitals, net
2,346
0.2
%
8,927
0.6
%
Loss on closure of hospitals, net
18,414
1.4
%
18,195
1.3
%
Total operating costs and expenses
1,335,860
102.4
%
1,504,128
105.9
%
Income (loss) from operations
(30,985
)
(2.4
)%
(84,169
)
(5.9
)%
Interest expense, net
98,904
7.6
%
95,307
6.7
%
Income (loss) before income taxes
(129,889
)
(10.0
)%
(179,476
)
(12.6
)%
Provision for (benefit from) income
taxes
386
—
%
(1,162
)
—
%
Net income (loss) (a)
(130,275
)
(10.0
)%
(178,314
)
(12.6
)%
Less: Net income (loss) attributable to
noncontrolling interests
1,532
0.1
%
1,200
—
%
Net income (loss) attributable to Quorum
Health Corporation
$
(131,807
)
(10.1
)%
$
(179,514
)
(12.6
)%
Earnings (loss) per share attributable to
Quorum Health Corporation stockholders:
Basic and diluted (b)
$
(4.41
)
$
(6.21
)
Weighted-average shares outstanding:
Basic and diluted
29,875,196
28,891,363
QUORUM HEALTH
CORPORATION
UNAUDITED CONSOLIDATED
SELECTED OPERATING DATA
Three Months Ended September
30,
2019
2018
Variance
% Variance
Consolidated:
Number of licensed beds at end of period
(c)
2,038
2,604
(566
)
(21.7
)%
Admissions (d)
15,453
17,797
(2,344
)
(13.2
)%
Adjusted admissions (e)
42,089
45,536
(3,447
)
(7.6
)%
Surgeries (f)
16,883
17,927
(1,044
)
(5.8
)%
Emergency room visits (g)
127,168
135,231
(8,063
)
(6.0
)%
Medicare case mix index (h)
1.43
1.42
0.01
0.7
%
Same-facility: (i)
Number of licensed beds at end of period
(c)
2,038
2,038
—
—
%
Admissions (d)
13,337
14,175
(838
)
(5.9
)%
Adjusted admissions (e)
37,590
37,500
90
0.2
%
Surgeries (f)
14,712
14,860
(148
)
(1.0
)%
Emergency room visits (g)
109,529
109,928
(399
)
(0.4
)%
Medicare case mix index (h)
1.41
1.43
(0.02
)
(1.4
)%
Nine Months Ended September
30,
2019
2018
Variance
% Variance
Consolidated:
Number of licensed beds at end of period
(c)
2,038
2,604
(566
)
(21.7
)%
Admissions (d)
49,562
56,546
(6,984
)
(12.4
)%
Adjusted admissions (e)
127,027
140,282
(13,255
)
(9.4
)%
Surgeries (f)
51,515
57,628
(6,113
)
(10.6
)%
Emergency room visits (g)
387,724
424,417
(36,693
)
(8.6
)%
Medicare case mix index (h)
1.45
1.43
0.02
1.4
%
Same-facility: (i)
Number of licensed beds at end of period
(c)
2,038
2,038
—
—
%
Admissions (d)
41,310
44,052
(2,742
)
(6.2
)%
Adjusted admissions (e)
109,939
113,193
(3,254
)
(2.9
)%
Surgeries (f)
43,967
45,867
(1,900
)
(4.1
)%
Emergency room visits (g)
324,915
333,445
(8,530
)
(2.6
)%
Medicare case mix index (h)
1.44
1.43
0.01
0.7
%
QUORUM HEALTH
CORPORATION
UNAUDITED CONSOLIDATED
SELECTED OPERATING DATA
Three Months Ended September
30,
2019
2018
$ Variance
% Variance
Consolidated:
Net patient revenues
$
401,552
$
440,731
$
(39,179
)
(8.9
)%
Non-patient revenues
18,348
19,776
(1,428
)
(7.2
)%
Total net operating revenues
$
419,900
$
460,507
$
(40,607
)
(8.8
)%
Net patient revenues per adjusted
admission
$
9,541
$
9,679
$
(138
)
(1.4
)%
Net operating revenues per adjusted
admission
$
9,977
$
10,113
$
(136
)
(1.3
)%
Same-facility:
Net patient revenues
$
360,684
$
369,904
$
(9,220
)
(2.5
)%
Non-patient revenues
17,950
19,432
(1,482
)
(7.6
)%
Total net operating revenues
$
378,634
$
389,336
$
(10,702
)
(2.7
)%
Net patient revenues per adjusted
admission
$
9,595
$
9,864
$
(269
)
(2.7
)%
Net operating revenues per adjusted
admission
$
10,073
$
10,382
$
(309
)
(3.0
)%
Nine Months Ended September
30,
2019
2018
$ Variance
% Variance
Consolidated:
Net patient revenues
$
1,247,605
$
1,354,588
$
(106,983
)
(7.9
)%
Non-patient revenues
57,270
65,371
(8,101
)
(12.4
)%
Total net operating revenues
$
1,304,875
$
1,419,959
$
(115,084
)
(8.1
)%
Net patient revenues per adjusted
admission
$
9,822
$
9,656
$
166
1.7
%
Net operating revenues per adjusted
admission
$
10,272
$
10,122
$
150
1.5
%
Same-facility:
Net patient revenues
$
1,079,321
$
1,104,199
$
(24,878
)
(2.3
)%
Non-patient revenues
56,013
62,239
(6,226
)
(10.0
)%
Total net operating revenues
$
1,135,334
$
1,166,438
$
(31,104
)
(2.7
)%
Net patient revenues per adjusted
admission
$
9,817
$
9,755
$
62
0.6
%
Net operating revenues per adjusted
admission
$
10,327
$
10,305
$
22
0.2
%
QUORUM HEALTH
CORPORATION
UNAUDITED CONDENSED
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Par
Value per Share and Shares)
September 30,
December 31,
2019
2018
ASSETS
Current assets:
Cash and cash equivalents
$
44,431
$
3,203
Patient accounts receivable
283,701
322,608
Inventories
39,324
45,646
Prepaid expenses
20,412
19,683
Due from third-party payors
26,449
63,443
Other current assets
33,643
36,405
Total current assets
447,960
490,988
Property and equipment, net
485,495
559,438
Goodwill
391,701
401,073
Intangible assets, net
47,807
48,289
Operating lease right-of-use assets
78,606
—
Other long-term assets
70,199
74,306
Total assets
$
1,521,768
$
1,574,094
LIABILITIES AND EQUITY
Current liabilities:
Current maturities of long-term debt
$
1,646
$
1,697
Current portion of operating lease
liabilities
24,835
—
Accounts payable
153,645
143,917
Accrued liabilities:
Accrued salaries and benefits
68,273
76,908
Accrued interest
33,580
10,024
Due to third-party payors
41,998
45,852
Other current liabilities
46,623
43,336
Total current liabilities
370,600
321,734
Long-term debt
1,195,407
1,191,777
Long-term operating lease liabilities
56,346
—
Deferred income tax liabilities, net
7,049
6,736
Other long-term liabilities
93,454
126,499
Total liabilities
1,722,856
1,646,746
Redeemable noncontrolling interests
2,278
2,278
Equity:
Quorum Health Corporation stockholders'
equity (deficit):
Preferred stock, $0.0001 par value per
share, 100,000,000 shares authorized, none issued
—
—
Common stock, $0.0001 par value per share,
300,000,000 shares authorized; 32,908,366 shares issued and
outstanding at September 30, 2019, and 31,521,398 shares issued and
outstanding at December 31, 2018
3
3
Additional paid-in capital
561,081
557,309
Accumulated other comprehensive income
(loss)
905
759
Accumulated deficit
(780,999
)
(648,464
)
Total Quorum Health Corporation
stockholders' equity (deficit)
(219,010
)
(90,393
)
Nonredeemable noncontrolling interests
15,644
15,463
Total equity (deficit)
(203,366
)
(74,930
)
Total liabilities and equity
$
1,521,768
$
1,574,094
QUORUM HEALTH
CORPORATION
UNAUDITED CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
Three Months Ended September
30,
Nine Months Ended September
30,
2019
2018
2019
2018
Cash flows from operating activities:
Net income (loss)
$
(75,192
)
$
(53,886
)
$
(130,275
)
$
(178,314
)
Adjustments to reconcile net income (loss)
to net cash provided by (used in) operating activities:
Depreciation and amortization
15,028
16,612
44,167
52,015
Non-cash interest expense, net
2,306
1,860
6,625
6,394
Provision for (benefit from) deferred
income taxes
71
(1,129
)
192
(1,104
)
Stock-based compensation expense
1,744
2,766
4,708
7,986
Impairment of long-lived assets and
goodwill
8,010
32,438
42,820
72,198
Loss (gain) on sale of hospitals, net
1,206
805
2,346
8,927
Non-cash portion of loss (gain) on
hospital closures
11,781
—
11,781
6,394
Changes in reserves for self-insurance
claims, net of payments
(119
)
4,623
(25,922
)
15,003
Other non-cash expense (income), net
3,237
380
1,414
387
Changes in operating assets and
liabilities, net of acquisitions and divestitures:
Patient accounts receivable
8,166
9,206
26,946
30,280
Due from and due to third-party payors,
net
10,120
8,344
7,858
29,322
Inventories, prepaid expenses and other
current assets
5,726
(7,353
)
5,494
(7,582
)
Accounts payable and accrued
liabilities
44,793
12,108
36,009
2,394
Long-term assets and liabilities, net
(11,721
)
1,560
(11,323
)
(1,365
)
Net cash provided by (used in) operating
activities
25,156
28,334
22,840
42,935
Cash flows from investing activities:
Capital expenditures for property and
equipment
(7,720
)
(9,576
)
(25,831
)
(34,895
)
Capital expenditures for software
(1,843
)
(483
)
(5,360
)
(1,527
)
Acquisitions, net of cash acquired
(76
)
(63
)
(531
)
(121
)
Proceeds from the sale of hospitals
40,992
—
52,733
39,170
Other investing activities, net
3,643
10
3,260
259
Net cash provided by (used in) investing
activities
34,996
(10,112
)
24,271
2,886
Cash flows from financing activities:
Borrowings under revolving credit
facilities
138,000
121,000
465,000
368,000
Repayments under revolving credit
facilities
(155,000
)
(135,000
)
(454,000
)
(368,000
)
Borrowings of long-term debt
—
90
186
157
Repayments of long-term debt
(445
)
(354
)
(14,408
)
(31,801
)
Payments of debt issuance costs
—
—
—
(2,268
)
Payments on purchase contracts
(374
)
—
(374
)
—
Cancellation of restricted stock awards
for payroll tax withholdings on vested shares
(24
)
(36
)
(588
)
(1,979
)
Cash distributions to noncontrolling
investors
(143
)
(678
)
(1,699
)
(1,481
)
Net cash provided by (used in) financing
activities
(17,986
)
(14,978
)
(5,883
)
(37,372
)
Net change in cash, cash equivalents and
restricted cash
42,166
3,244
41,228
8,449
Cash, cash equivalents and restricted cash
at beginning of period
2,265
10,822
3,203
5,617
Cash, cash equivalents and restricted cash
at end of period
$
44,431
$
14,066
$
44,431
$
14,066
FOOTNOTES TO UNAUDITED
FINANCIAL STATEMENTS AND SELECTED OPERATING DATA
(a)
EBITDA is a non-GAAP financial measure that consists of net
income (loss) before interest, income taxes, depreciation and
amortization. Adjusted EBITDA, also a non-GAAP financial measure,
is EBITDA adjusted to add back the effect of certain legal,
professional and settlement costs, impairment of long-lived assets
and goodwill, net loss (gain) on sale of hospitals, net loss on
closure of hospitals, transition of transition services agreements
(“TSAs”), change in actuarial estimates and headcount reductions
and executive severance. The Company uses Adjusted EBITDA as a
measure of financial performance. Adjusted EBITDA is a key measure
used by the Company’s management to assess the operating
performance of its hospital operations business and to make
decisions on the allocation of resources. Additionally, management
utilizes Adjusted EBITDA in assessing the Company’s results of
operations and in comparing the Company’s results of operations
between periods. Same-facility Adjusted EBITDA, also a non-GAAP
financial measure, is further adjusted to exclude the effect of
EBITDA of hospitals sold or closed as of September 30, 2019. The
Company has presented Adjusted EBITDA and Same-facility Adjusted
EBITDA in this press release because it believes these measures
provide investors and other users of the Company’s financial
statements with additional information about how the Company’s
management assesses its results of operations.
Adjusted EBITDA and Same-facility Adjusted
EBITDA are not measurements of financial performance under U.S.
GAAP. These calculations should not be considered in isolation or
as a substitute for net income, operating income or any other
measure calculated in accordance with U.S. GAAP. The items excluded
from Adjusted EBITDA and Same-facility Adjusted EBITDA are
significant components in understanding and evaluating the
Company’s financial performance. The Company believes such
adjustments are appropriate, as the magnitude and frequency of such
items can vary significantly and are not related to the assessment
of the Company’s normal operating performance. Additionally, the
Company’s calculation of Adjusted EBITDA and Same-facility Adjusted
EBITDA may not be comparable to similarly titled measures reported
by other companies.
The following table reconciles Adjusted
EBITDA and Same-facility Adjusted EBITDA, each as defined above, to
net income (loss), the most directly comparable U.S. GAAP financial
measure, as derived directly from the Company’s consolidated
statements of income for the respective periods (in thousands):
Three Months Ended September
30,
Nine Months Ended September
30,
2019
2018
2019
2018
Net income (loss)
$
(75,192
)
$
(53,886
)
$
(130,275
)
$
(178,314
)
Interest expense, net
33,056
32,450
98,904
95,307
Provision for (benefit from) income
taxes
137
(1,074
)
386
(1,162
)
Depreciation and amortization
15,028
16,612
44,167
52,015
EBITDA
(26,971
)
(5,898
)
13,182
(32,154
)
Legal, professional and settlement
costs
5,191
1,519
6,480
10,349
Impairment of long-lived assets and
goodwill
8,010
32,438
42,820
72,198
Loss (gain) on sale of hospitals, net
1,206
805
2,346
8,927
Loss on closure of hospitals, net
18,414
1,111
18,414
18,195
Transition of transition services
agreements
6,445
2,445
8,421
3,682
Change in actuarial estimates
—
—
(26,880
)
—
Headcount reductions and executive
severance
1,393
1,722
2,965
7,688
Adjusted EBITDA
13,688
34,142
67,748
88,885
Negative EBITDA of divested hospitals
16,865
7,868
27,212
17,643
Same-facility Adjusted EBITDA
$
30,553
$
42,010
$
94,960
$
106,528
(b)
The following table reconciles net income (loss) attributable to
Quorum Health Corporation, as reported and on a per share basis,
with the adjustments described herein:
Three Months Ended September
30,
Nine Months Ended September
30,
2019
2018
2019
2018
(per share - basic and
diluted)
(per share - basic and
diluted)
Earnings (loss) per share attributable to
Quorum Health Corporation stockholders, as reported
$
(2.52
)
$
(1.85
)
$
(4.41
)
$
(6.21
)
Adjustments:
Legal, professional and settlement
costs
0.17
0.05
0.22
0.36
Impairment of long-lived assets and
goodwill
0.27
1.09
1.44
2.48
Loss (gain) on sale of hospitals, net
0.04
0.03
0.08
0.31
Loss on closure of hospitals, net
0.61
0.04
0.62
0.61
Transition of transition services
agreements
0.21
0.08
0.28
0.13
Change in actuarial estimates
—
—
(0.90
)
—
Headcount reductions and executive
severance
0.05
0.06
0.10
0.26
Net operating losses of divested
hospitals
0.56
0.26
0.91
0.59
Earnings (loss) per share attributable to
Quorum Health Corporation stockholders, excluding adjustments
$
(0.61
)
$
(0.24
)
$
(1.66
)
$
(1.47
)
(c)
Licensed beds are the number of beds for
which the appropriate state agency licenses a hospital, regardless
of whether the beds are actually available for patient use.
(d)
Admissions represent the number of
patients admitted for inpatient services.
(e)
Adjusted admissions are computed by
multiplying admissions by gross patient revenues and then dividing
that number by gross inpatient revenues.
(f)
Surgeries represent the number of
inpatient and outpatient surgeries.
(g)
Emergency room visits represent the number
of patients registered and treated in the Company’s emergency
rooms.
(h)
Medicare case mix index is a relative
value assigned to a diagnosis-related group of patients that is
used in determining the allocation of resources necessary to treat
the patients in that group. Medicare case mix index is calculated
as the average case mix index for all Medicare admissions during
the period.
(i)
Same-facility financial and operating data
excludes hospitals that were sold or closed prior to and as of the
end of the current reporting period. Same-facility operating
results have been adjusted to exclude the operating results of the
following hospitals and their affiliated entities:
Hospitals Divested as of
September 30, 2019
Hospital
Licensed Beds
Disposition
Divestiture Date
Sandhills Regional Medical Center
("Sandhills")
64
Sold
December 1, 2016
Barrow Regional Medical Center
("Barrow")
56
Sold
December 31, 2016
Cherokee Medical Center ("Cherokee")
60
Sold
March 31, 2017
Trinity Hospital of Augusta
("Trinity")
231
Sold
June 30, 2017
Lock Haven Hospital ("Lock Haven")
47
Sold
September 30, 2017
Sunbury Community Hospital ("Sunbury")
70
Sold
September 30, 2017
L.V. Stabler Memorial Hospital ("L.V.
Stabler")
72
Sold
October 31, 2017
Affinity Medical Center ("Affinity")
156
Closed
February 11, 2018
Vista Medical Center West ("Vista
West")
70
Sold
March 1, 2018
Clearview Regional Medical Center
("Clearview")
77
Sold
March 31, 2018
McKenzie Regional Hospital
("McKenzie")
45
Sold
September 30, 2018
Scenic Mountain Medical Center ("Scenic
Mountain")
146
Sold
April 12, 2019
Watsonville Community Hospital
("Watsonville")
106
Sold
September 30, 2019
MetroSouth Medical Center
("MetroSouth")
314
Closed
September 30, 2019
Forward-Looking Statements
The terms “QHC,” “Quorum Health,” “the Company,” “we,” “us” or
“our” refer to Quorum Health Corporation or one or more of its
subsidiaries or affiliates as applicable.
This press release contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as
amended, Section 21E of the Securities Exchange Act of 1934, as
amended, and the Private Securities Litigation Reform Act of 1995
that involve risk and uncertainties. All statements in this press
release other than statements of historical fact, including
statements regarding projections, expected operating results, and
other events that depend upon or refer to future events or
conditions or that include words such as “expects,” “anticipates,”
“intends,” “plans,” “believes,” “estimates,” “thinks,” “outlook,”
and similar expressions, are forward-looking statements. Although
the Company believes that these forward-looking statements are
based on reasonable assumptions, these assumptions are inherently
subject to significant economic and competitive uncertainties and
contingencies, which are difficult or impossible to predict
accurately and may be beyond the control of the Company.
Accordingly, the Company cannot give any assurance that its
expectations will in fact occur and cautions that actual results
may differ materially from those in the forward-looking statements.
A number of factors could affect the future results of the Company
or the healthcare industry generally and could cause the Company’s
expected results to differ materially from those expressed in this
press release.
These factors include, but are not limited to, the
following:
- general economic and business conditions, both nationally and
in the regions in which we operate;
- risks associated with our substantial indebtedness, leverage
and debt service obligations, including our ability to comply with
our debt covenants, including our senior credit facility, as
amended;
- our ability to successfully complete divestitures and the
timing thereof, our ability to complete any such divestitures on
desired terms or at all, and our ability to realize the intended
benefits from any such divestitures;
- changes in reimbursement methodologies and rates paid by
federal or state healthcare programs, including Medicare and
Medicaid, or commercial payors, and the timeliness of reimbursement
payments, including delays in certain states in which we
operate;
- the extent to which regulatory and economic changes occur in
Illinois, where a material portion of our revenues are
concentrated;
- demographic changes;
- the impact of changes made to the Affordable Care Act, the
potential for repeal or additional changes to the Affordable Care
Act, its implementation or its interpretation, as well as changes
in other federal, state or local laws or regulations affecting the
healthcare industry;
- increases in the amount and risk of collectability of patient
accounts receivable, including lower collectability levels which
may result from, among other things, self-pay growth and
difficulties in collecting payments for which patients are
responsible, including co-pays and deductibles;
- competition;
- changes in medical or other technology;
- any potential impairments in the carrying values of long-lived
assets and goodwill or the shortening of the useful lives of
long-lived assets;
- the costs associated with the transition of the transition
services agreements (“TSAs”) with CHS, as well as the additional
costs and risks associated with any operational problems, delays in
collections from payors, and errors and control issues during the
termination and transition process, and our ability to realize the
intended benefits from transitioning the transition services
agreements;
- our ability to timely and effectively establish, implement,
transition, and maintain the necessary information technology
systems and infrastructure, including cloud computing arrangements,
to support our operations and initiatives;
- the impact of certain outsourcing functions, and the ability of
R1 RCM, as provider of our revenue cycle management services, to
timely and appropriately bill and collect;
- our ability to manage effectively our arrangements with
third-party vendors for key non-clinical business functions and
services;
- our ability to achieve operating and financial targets and to
control the costs of providing services if patient volumes are
lower than expected;
- our ability to achieve and realize the operational and
financial benefits expected from our margin improvement
program;
- the effects related to outbreaks of infectious diseases;
- our ability to attract and retain, at reasonable employment
costs, qualified personnel, key management, physicians, nurses and
other healthcare workers;
- the impact of seasonal or severe weather conditions or
earthquakes;
- increases in wages as a result of inflation or competition for
highly technical positions and rising medical supply and drug costs
due to market pressure from pharmaceutical companies and new
product releases;
- our ongoing ability to maintain and utilize certified EHR
technology;
- the efforts of healthcare insurers, providers, large employer
groups and others to contain healthcare costs, including the trend
toward treatment of patients in less acute or specialty healthcare
settings and the increased emphasis on value-based purchasing;
- the failure to comply with governmental regulations;
- our ability, where appropriate, to enter into, maintain and
comply with provider arrangements with payors and the terms of
these arrangements, which may be impacted by the increasing
consolidation of health insurers and managed care companies and
vertical integration efforts involving payors and healthcare
providers;
- the potential adverse impact of known and unknown government
investigations, internal investigations, audits, and federal and
state false claims act litigation and other legal proceedings,
including the shareholder litigation against our company and
certain of our officers and directors, the labor and employment
litigations, qui tam litigation, breach of contract litigation and
threats of litigation, as well as the significant costs and
attention from management required to address such matters;
- liabilities and other claims asserted against us, including
self-insured malpractice claims;
- the impact of cyber-attacks or security breaches, including,
but not limited to, the compromise of our facilities and
confidential patient data, potential harm to patients, remediation
and other expenses, potential liability under the Health Insurance
Portability and Accountability Act of 1996, or HIPAA, and consumer
protection laws, federal and state governmental inquiries, and
damage to our reputation;
- our ability to utilize our income tax loss carryforwards;
- our ability to maintain certain accreditations at our
facilities;
- the success and long-term viability of healthcare insurance
exchanges and potential changes to the beneficiary enrollment
process;
- the extent to which states support or implement changes to
Medicaid programs, utilize healthcare insurance exchanges or alter
the provision of healthcare to state residents through regulation
or otherwise;
- the timing and amount of cash flows related to the California
Hospital Quality Assurance Fee (“HQAF”) program, as well as the
potential for retroactive adjustments for prior year payments;
- the effects related to the continued implementation of the
sequestration spending reductions and the potential for future
deficit reduction legislation;
- changes in U.S. generally accepted accounting principles,
including the impacts of adopting newly issued accounting
standards;
- the availability and terms of capital to fund capital
expenditures;
- our ability to obtain adequate levels of professional and
general liability and workers’ compensation liability insurance;
and
- the risk factors set forth in our other public filings with the
Securities and Exchange Commission.
Although we believe that these forward-looking statements are
based upon reasonable assumptions, these assumptions are inherently
subject to significant regulatory, economic and competitive
uncertainties and contingencies, which are difficult or impossible
to predict accurately and may be beyond our control. Accordingly,
we cannot give any assurance that our expectations will in fact
occur and caution that actual results may differ materially from
those in the forward-looking statements. Given these uncertainties,
prospective investors are cautioned not to place undue reliance on
these forward-looking statements. These forward-looking statements
are made as of the date of this filing. We undertake no obligation
to revise or update any forward-looking statements, or to make any
other forward-looking statements, whether as a result of new
information, future events or otherwise.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20191107006121/en/
Asher Dewhurst Westwicke Partners QuorumHealth@Westwicke.com
(443) 213-0500
Quorum Health (NYSE:QHC)
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